In a major relief to Samsung India, the Delhi High Court quashed the initiation of reassessment proceedings after lapse of 4 years.
The present appeal has been preferred by the Revenue against the order dated 23.02.2018, passed by the Income Tax Appellate Tribunal [“ITAT”], whereby, the reassessment proceedings against the respondent-assessee have been invalidated on account of being initated in the absence of any fresh tangible material for the Assessment Year [“AY”] 2002-03.
The Revenue preferred an appeal before the ITAT against the order of the CIT(A) deleting additions made by the AO on account of prior period expenses, receivables etc. Subsequently, a cross objection was also filed by the respondent-assessee against the finding of the CIT(A) that the reassessment proceedings were sustainable as per law. Vide order dated 23.02.2018, the said cross objection was decided in favour of the respondent-assessee and the appeal of the Revenue came to be dismissed by the ITAT.
The counsel for the Revenue, at the outset, submitted that the case at hand is squarely covered in favour of the Revenue by the decision of the Supreme Court in the case of CIT v. P.V.S. Beedies (P) Ltd, inasmuch as the ratio laid down in the said decision permits reopening of assessment on the basis of a factual error pointed out by the revenue audit party report. He contended that the moment the audit objection is accepted by the Revenue, it is implied that there is no true disclosure by the respondent-assessee.
On the contrary, learned counsel appearing on behalf of the respondent-assessee vehemently opposed the submissions made by the learned counsel for the Revenue. He submitted that the initiation of reassessment proceedings is based upon the reasons recorded by the concerned authority, which cannot be subsequently allowed to improve or supplement the said reasons at the stage of appellate proceedings. According to him, the reasons recorded in the present case does not mention any failure upon the respondent-assessee to fully or truly disclose the material facts.
A Division Bench comprising Justices Purushaindra Kumar Kaurav and Yashwant Varma observed that “We find that the initiation of reassessment proceedings after a lapse of four years herein, is dehors the settled position of law as no new tangible material can be said to have been discovered by the Revenue which would warrant reopening the assessment for the AY in question. Thus, we do not find any reason to intermeddle with the order of the ITAT.”
“Undisputedly, the reassessment proceedings were initiated after passing of the period of four years from the relevant AY. An upshot of the above discussion would suggest that the Revenue did not have in its possession any fresh tangible material, which is otherwise sine qua non for initiating reassessment proceedings after a lapse of the said statutorily prescribed period” the Court noted.
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